Beef Is Getting Pricier and You Can Blame Asia for That
Date: Thursday, October 17, 2019
Source: The Wall Street Journal
Livestock futures and prices for many beef cuts have climbed since September
Cattle prices in the U.S. have risen since September, as a protein shortage in Asia drives bets that livestock will be in increasingly high demand.
Live cattle futures on the CME are up 14% from the start of a rally on Sept. 10 to nearly $1.14 a pound.
Retail prices are also up. Prices for many cuts of beef were advertised higher this week than at this time last year, according to the U.S. Department of Agriculture. A common variety of ground beef sold for an average of $3.75 a pound this week, for instance, up nearly 20% from a year earlier.
The rally coincides with the continued spread of African swine fever in Asia. The virus—fatal for pigs but harmless to humans—was found in South Korea in September, after surfacing in North Korea in May. As of last week, 145,000 pigs have been culled in South Korea, the government reported.
The disease has devastated hog herds in China, the world’s largest pork market. Roughly 1.17 million hogs have been culled there since August 2018 in an effort to stop the disease, according to the Food and Agriculture Organization of the United Nations. This widespread slaughter has pushed the price for pork in China up 69%.
The U.S. beef industry is aiming to fill some of that protein deficit. Beef exports to South Korea are already 8% higher than last year, totaling 174,290 metric tons through August, according to the U.S. International Trade Commission. Exports to Japan were 3% lower in that time frame, but demand is expected to pick up as meat supplies tighten in the region. A U.S.-Japan trade deal reached in August also will likely boost demand. The agreement reduces or removes tariffs on some $7 billion in U.S. agricultural goods exported to Japan annually, including beef.
“The U.S. beef industry is extremely excited at the prospect of lower tariffs in Japan,” said Dan Halstrom, president and CEO of the U.S. Meat Export Federation.
Cattle prices sold off steeply in August after a fire decimated Tyson Foods Inc. ’s Holcomb, Kan., beef processing plant, depressing demand for cattle and pushing futures down to under $1 per pound. Now, traders and stockyard operators say the market is adjusting to demand pressures that outstrip that supply hiccup.
“We did oversell it, our markets in this day and age overreact,” said Justin Tupper, owner and manager of St. Onge Auction, which auctions off 125,000 cattle a year in St. Onge, S.D.
A spokeswoman for Tyson said Tuesday that the company anticipates a return to normal operations in early 2020. Before the Aug. 9 fire, the plant processed roughly 5% of all U.S. beef production.